What is the Single Family Loan Sale (SFLS) Program?

The Single Family Loan Sales Program (SFLS) also referred to as the Distressed Asset Stabilization Program (DASP) or Bulk Sales, allows HUD to pay insurance claims and accept assignment of eligible defaulted FHA loans. Under the insurance contract with HUD, which is a separate contract from the loan documents, lenders are entitled to assign defaulted loans under certain circumstances. Because the loan is in default and the alternative is foreclosure, borrower approval is not required. HUD accepts these loans in exchange for a claim payment through the SFLS program and terminates the mortgage insurance resulting in the loans no longer being FHA insured. FHA then pools and sells those loans through a competitive auction and transfers the defaulted loans to the winning qualified bidders.

Once the loan is purchased, foreclosure is delayed, during which time the new servicer can work with the borrower to find an affordable solution to avoid foreclosure.

The SFLS Program (Assignment claim process) is an alternative to the normal foreclosure (Conveyance claim process) in which the lender must first foreclose and then convey the vacant property to FHA.

Upon sale of the loan, the prior servicer will send the borrower a timely notice of servicing transfer also called a goodbye letter. The goodbye letter includes notice of the new servicer with their contact information and also includes notice that the FHA mortgage insurance on the loan has been terminated and no further mortgage insurance premiums will be due. Borrowers that have not received the goodbye letter, should contact their prior lender/servicer to obtain the new servicer contact information.

FHA Policy information related to the SFLS claim submission process is available in Handbook 4000.1 IV.A.2.b.iii. at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

FHA’s Office of Asset Sales webpage is https://www.hud.gov/program_offices/housing/comp/asset/hsgloan

The Office of Asset Sales may be contacted by phone at  (202) 708-2625 or email at assetsales@hud.gov

Office of Asset Sales

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-03208